Process of Transfer of Shares

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	Blog Categories All FAQ Demat of Shares (1) Payment of Stamp Duty (2) Transfer of Shares (0) Transfer of Shares-Process (1) Demat of Shares > Transfer of Shares-Process Process of Transfer of Shares Category: Transfer of Shares-Process, Posted on: 13/02/2025 , Posted By: CS Divesh Goyal Visitor Count:12 Process of Transfer of Shares of Private Company In Demat Form Section 56 of Companies Act, 2013 read with The Depository Act, 1996 (11^th February 2025) INTRODUCTION: The author will cover the "Process and provisions of transfer of shares of Private Limited Company in Demat form instead of Physical shares" in this column. SHORT SUMMARY: With the advancement of technology and regulatory reforms, the transfer of shares in India has shifted from the physical mode to dematerialized (demat) mode. The Depositories Act, 1996, governs the process of share transfer through depositories such as NSDL and CDSL. This article explains the step-by-step process of transferring shares through the demat system, the applicable legal provisions, and compliance requirements. v Legal Framework Governing Stamp Duty: ü Depositories Act, 1996: Governs the electronic holding and transfer of shares. ü Companies Act, 2013 (Section 56 & Section 58): Deals with the transfer and transmission of securities. STEP-BY-STEP PROCESS OF TRANSFER OF SHARES THROUGH DEMAT I. Agreement Between Transferor and Transferee: The seller (transferor) and buyer (transferee) agree on the share transfer. The buyer must have an active Demat Account with a Depository Participant (DP) registered with NSDL or CDSL (wherever company has registered itself). II. Submission of Delivery Instruction Slip (DIS) by Transferor: The seller must fill out and submit a Delivery Instruction Slip (DIS) to their Depository Participant (DP). The DIS must contain following informations: · ISIN (International Securities Identification Number) of the company’s shares. · Name of the company. · Number of shares to be transferred. · Buyer’s DP ID and Client ID. · Type of transfer (market/off-market). · Execution date. III. Verification and Processing by DP: ü The seller’s DP verifies the DIS details. ü The DP shall send an intimation to RTA/ Company for verification of same. ü If DP receive the confirmation from RTA/ Company they processes the transfer request electronically through NSDL/CDSL. IV. Debit from Transferor’s Demat Account & Credit to Transferee’s Account: ü Once processed, the shares are debited from the seller’s Demat Account. ü The shares are then credited to the buyer’s Demat Account. V. Payment Consideration: ü The buyer makes the payment to the seller based on agreed terms (in case of an off-market transfer). ü In case of off-market transfers, payment is usually made via bank transfer, cheque, or RTGS. Additional Considerations 1. Off-Market vs. Market Transfers ü Market Transfer: When shares are sold through a stock exchange. ü Off-Market Transfer: Direct transfer between individuals/entities, such as for gift, family settlement, or private sale Stamp Duty on Off-Market Transfers ü 0.015% of the consideration value of shares is payable as stamp duty (collected via NSDL/CDSL online). Conclusion: The process of transferring shares through demat mode ensures efficiency, security, and transparency. Investors must comply with regulatory requirements under the Depositories Act, and the Companies Act to execute a valid share transfer. Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com). Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTIONWITH THE USE OF THE INFORMATION Disclaimer: The content of the blog does not create any responsibility of the firm / its authorized persons whose website is being accessed. The blog is not for legal use. Kindly verify the correctness of data/contents from your own sources. This is only for information purpose. Add a Comment Name: Your Comment: View Comments (0)

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